BELLICUM PHARMACEUTICALS, INC. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Annual Report on Form 10-K for the year endedDecember 31, 2020 , filed with theSEC onMarch 31, 2021 , or our Annual Report, as well as our unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q, or this Quarterly Report. Forward-Looking Statements This report contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which are subject to the "safe harbor" created by those sections. These forward-looking statements include, but are not limited to, statements concerning our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management. The words "anticipate," "believe," "could," "designed," "estimate," "expect," "intend," "may," "plan," "potential," "project," "will," "would," and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in Part II, Item 1A, "Risk Factors" in this Quarterly Report on Form 10-Q, Part I, Item 1A, "Risk Factors" in our Annual Report and in our other filings with theSEC . The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements.
Overview
We are a clinical stage biopharmaceutical company focused on discovering and
developing novel, controllable cellular immunotherapies for various forms of
cancer, including both hematological cancers and solid tumors. We are advancing
CAR-T cell therapies, which are an innovative approach in which a patient's or
donor's T cells are genetically modified to carry chimeric antigen receptors, or
CARs. We are using our proprietary Chemical Induction of Dimerization, or CID,
technology platform to engineer our product candidates with switch technologies
that are designed to control components of the immune system in real time. By
incorporating our CID platform, our product candidates may offer better efficacy
and safety outcomes than are seen with current cellular immunotherapies.
Cell behavior is controlled by cascades of specialized signaling proteins. CID
consists of molecular switches, modified forms of these signaling proteins,
which are triggered inside the patient by infusion of a small molecule, instead
of by natural upstream signals. We genetically introduce these molecular
switches into the appropriate immune cells and deliver the cells to the patient
in the manner of conventional cellular immunotherapy. We have developed two such
switches: an "activation switch," designed to stimulate activation,
proliferation and persistence of the immunotherapy cells and provide other
immunomodulatory benefits, and a "safety switch," designed to initiate
programmed cell death, or apoptosis, of the immunotherapy cells. Each of our
product candidates incorporates one or both switches, for enhanced, real time
control of efficacy and safety:
•The inducible MyD88/CD40 (iMC) activation switch that is incorporated into our
GoCAR product candidates is designed to enhance CAR-based cell therapies by
augmenting multiple mechanisms of action, including: 1) boosting effector cell
proliferation; 2) enhancing functional persistence by resisting exhaustion and
inhibitory signals found in the tumor microenvironment; and 3) stimulating the
cancer patient's own immune system to intensify tumor killing. Unlike other CAR
therapies that can behave unpredictably due to their autonomous activity, GoCAR
antitumor effects are controlled through scheduled administration of rimiducid.
In the event of severe side effects, GoCAR activity can be attenuated by
extending the interval between rimiducid doses or suspending further rimiducid
administration.
•Our CaspaCIDe™ safety switch (also known as inducible Caspase-9, or iC9) is
designed to be inactive unless the patient experiences a serious side effect
(e.g., CRS, neurologic toxicities or off-tumor / on-target toxicities). In that
event, rimiducid or temsirolimus is administered to induce Caspase-9 and
eliminate the cells, with the goal of attenuating the therapy and resolving the
serious side effect.
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•Some of our product candidates are "dual-switch" GoCARs that are designed to
provide a user-controlled system for managing proliferation, persistence and
safety of tumor antigen-specific CAR cells by incorporating both our iMC and
CaspaCIDe switches.
By incorporating our novel switch technologies, we are developing product candidates with the potential to elicit positive clinical outcomes and ultimately change the treatment paradigm in various areas of cellular immunotherapy. Our most advanced programs are described below.
•BPX-601 is an autologous GoCAR-T product candidate containing our proprietary iMC activation switch, designed to treat solid tumors expressing prostate stem cell antigen, or PSCA. We believe iMC enhances T cell proliferation and persistence, enhances host immune activity, and modulates the tumor microenvironment to improve the potential to treat solid tumors compared to traditional CAR-T therapies. A Phase 1/2 clinical trial, called BP-012, in patients with metastatic castration-resistant prostate cancer or pancreatic cancer expressing PSCA is ongoing. •BPX-603 is an autologous dual-switch GoCAR-T product candidate containing both the iMC activation and CaspaCIDe safety switches. BPX-603 is our first controllable dual-switch GoCAR-T product candidate and is designed to target solid tumors that express the human epidermal growth factor receptor 2 antigen, or HER2. A Phase 1/2 clinical trial called BPX-603-201A in patients with HER2+ solid tumors is ongoing. •Rivo-cel (rivogenlecleucel, formerly known as BPX-501), is a product candidate containing our proprietary CaspaCIDe safety switch that is intended to improve outcomes of hematopoietic stem cell transplantation in the treatment of hematologic malignancies and inherited blood disorders. We are pursuing a strategic partner for rivo-cel to assume future development and commercialization responsibilities. Concurrently, we have reduced and expect to continue to reduce our rivo-cel related activities. We have developed efficient and scalable processes to manufacture genetically modified T cells of high quality, which are currently being used to generate products for our clinical trials. We are leveraging this know how in combination with our proprietary cellular control technologies, resources, capabilities and expertise for the manufacture of CAR product candidates to create and develop first and best-in-class product candidates. OnMay 5, 2021 , we were notified by Nasdaq that we were in breach of Listing Rule 5450(b)(2)(A) (the "Market Value Rule") for continued listing on The Nasdaq Capital Market because the market value of our listed securities for 30 consecutive business days had been less than$35 million . In accordance with Nasdaq Listing Rule 5810(c)(3)(C), we were granted a grace period untilNovember 1, 2021 , to regain compliance with the Market Value Rule by maintaining a market value of listed securities$35 million or more for a minimum of 10 consecutive business days any time prior toNovember 1, 2021 . OnNovember 2, 2021 , Nasdaq notified us that we had not regained compliance with the Market Value Rule byNovember 1, 2021 , and unless we request a hearing before theNasdaq Hearings Panel (the "Panel") byNovember 9, 2021 , our securities will be delisted from Nasdaq. We intend to timely request a hearing before the Panel to appeal this determination, which we expect will stay any further action by Nasdaq until the conclusion of the hearing process.
Impact of COVID-19
In 2019, a novel strain of coronavirus, which causes COVID-19, was identified. Due to the rapid and global spread of the virus, onMarch 11, 2020 , theWorld Health Organization declared the COVID-19 outbreak a pandemic. To slow the proliferation of COVID-19, governments have implemented extraordinary measures, which have included the mandatory closure of businesses, restrictions on travel, and quarantine and physical distancing requirements. We have not experienced and do not anticipate a substantial impact to our operations as a result of the pandemic or these government measures. However, depending the duration and severity of the pandemic, we could experience impact in the future, including with respect to the operations of our manufacturing partners, clinical trial sites and regulatory agencies, all of which we are substantially dependent upon for our business. We are continuing to closely monitor the impact of the COVID-19 pandemic on our business. 24 -------------------------------------------------------------------------------- Results of Operations The following table sets forth a summary of our statement of operations for the periods indicated: Three Months Ended Nine Months Ended (in thousands) September 30, 2021 September 30, 2020 Change September 30, 2021 September 30, 2020 Change Revenues Supply agreement $ - $ - $ - $ 700 $ -$ 700 License revenue 5,000 - 5,000 5,000 - 5,000 Total revenues 5,000 - 5,000 5,700 - 5,700 Operating expenses: Research and development 6,348 8,140 (1,792) 19,531 30,346 (10,815) General and administrative 1,681 4,163 (2,482) 5,458 12,095 (6,637) Total operating expenses 8,029 12,303 (4,274) 24,989 42,441 (17,452) (Gain) loss on dispositions, net 14 - 14 478 (3,761) 4,239 Loss from operations (3,043) (12,303) 9,260 (19,767) (38,680) 18,913 Other income (expense): Interest income 6 10 (4) 24 392 (368) Interest expense - (725) 725 (4) (2,473) 2,469 Change in fair value of warrant and private placement option liabilities 4,264 12,131 (7,867) 7,506 14,256 (6,750) Other income 6 - 6 5 - 5 Total other income (expense) 4,276 11,416 (7,140) 7,531 12,175 (4,644) Net income (loss) $ 1,233 $ (887)$ 2,120 $ (12,236) $ (26,505)$ 14,269 Revenues The increase in revenues for the three months endedSeptember 30, 2021 , compared to the same periods last year, was related to the license agreement withThe University of Texas M. D. Anderson Cancer Center ("MD Anderson") for certain option and license rights to CaspaCIDe and related technologies. An upfront fee under the agreement of$5.0 million was recognized as revenue. This constitutes a majority of the revenue increase for the nine months endedSeptember 30, 2021 , together with the supply agreement withTakeda Development Center Americas, Inc. (Takeda) for the supply of rimiducid for potential use in clinical trials of TAK-007 (CD19 CAR-NK cell therapy). The supply was fulfilled in the second quarter of 2021 generating revenue of$0.7 million .
Research and Development Expenses (R&D)
The decrease in R&D expenses for the three months endedSeptember 30, 2021 , compared to the same period last year, was primarily due to reduced expenses related to the sale of the manufacturing facility, and the reduction in force that was implemented during the second half of 2020. This resulted in a$3.4 million reduction in salaries, benefits, travel, and share-based compensation related charges. This was partially offset by a$1.1 million increase in sublicense payment as a result of the license agreement withBaylor College of Medicine . There was also a$0.5 million increase in clinical trial cost and associated consulting expenses. The decrease in R&D expenses for the nine months endedSeptember 30, 2021 , compared to the same period last year, was primarily due to reduced expenses related to the sale of the manufacturing facility, and the reduction in force that was implemented during the second half of 2020. This resulted in a$9.9 million reduction in salaries, benefits, travel, and share-based compensation related charges, and a$0.3 million reduction from general R&D expenses primarily due to lower clinical trial activities. Additionally, depreciation expense and R&D related overhead expense decreased by$0.6 million due to the exit of manufacturing facility, related laboratories and office space.
General and Administrative Expenses (G&A)
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The decrease in G&A expenses for the three months ended September 30, 2021 ,
compared to the same period last year, was primarily due to the aforementioned
reduction in force that reduced employee-related charges by $1.7 million as well
as the reduction in clinical facility and depreciation expenses by $0.8 million
related to exit of manufacturing facility and office space.
The decrease in G&A expenses for the nine months ended September 30, 2021 ,
compared to the same period last year, was primarily due to the aforementioned
reduction in force that reduced employee-related charges by $4.9 million as well
as the reduction in clinical facility and depreciation expenses by $1.7 million
related to exit of manufacturing facility and office space.
Loss (gain) on dispositions, net
The loss on dispositions, net, for the three months endedSeptember 30, 2021 , compared to the same period last year, was a result of early termination of the operating lease for office equipment with a lump sum payment. The increase in the loss on dispositions, net, for the nine months endedSeptember 30, 2021 was primarily from the loss on the termination of the South San Francisco office space in the amount of$0.5 million , whereas in the same period last year, there was a gain on disposal of the clinical supply manufacturing facility toM.D. Anderson . Other Income (Expense) Other expense primarily consists of interest expense, partially offset by interest income, and changes in fair values of our warrant liability and the private placement option, which are remeasured at each reporting period. Due to the nature of the inputs in the model used to assess the fair value of the warrant liability and private placement option, we may experience significant fluctuations at each reporting period. These fluctuations may be due to a variety of factors, including changes in our stock price and changes in stock price volatility over the remaining term of the warrants and options. The decrease in other income for the three months endedSeptember 30, 2021 , compared to the same period last year, was primarily due to a$4.3 million gain recognized from the change in fair value of our warrant and private placement option liabilities, compared to$12.1 million gain in the same period last year. The gain recognized during the three months endedSeptember 30, 2021 was driven primarily by a decrease in our stock price over the period. The decrease in other income for the nine months endedSeptember 30, 2021 , compared to the same period last year, was primarily due to a$7.5 million gain recognized from the change in fair value of our warrant and private placement option liabilities, compared to$14.2 million gain in the same period last year. The gain recognized during the nine months endedSeptember 30, 2021 was driven primarily by a decrease in our stock price over the period.
Liquidity and Capital Resources
Going Concern and Management's Plans
The accompanying consolidated financial statements have been prepared on the basis that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. As ofSeptember 30, 2021 , we had cash, cash equivalents and restricted cash of$20.8 million and net cash used in operations of approximately$17.1 million for the nine months endedSeptember 30, 2021 . Our cash resources are primarily consumed by operating activities and we expect negative cash flows from operations to continue for at least the next 12 months. Our primary uses of capital are, and we expect will continue to be, compensation and related expenses, third-party clinical research and development services, laboratory and related supplies, clinical costs, legal and other regulatory expenses and general overhead costs. Based on our current research and development plans and our timing expectations related to the progress of our programs, we believe there is substantial doubt that our cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements into the second half of 2022. We plan to continue to attempt to obtain future financing and/or engage in strategic transactions, but we cannot predict, with certainty, the outcome of our actions to generate liquidity, including the availability of additional equity or debt financing, or whether such actions would generate the expected liquidity as currently planned. To continue as a going concern, we may postpone or eliminate some of our research and development programs and reduce our administrative costs. We may also intend to seek additional funding including, but not limited to any or all of the following potential sources: We have an effective shelf registration statement on Form S-3 for the offer and sale of up to$400.0 million of our securities, of which approximately$290.5 million remains available for future offerings. We may pursue additional funding through the sale of our securities in one or more offerings under this registration statement, however we cannot assure you that we will be able to do so on favorable terms. Our ability to offer and sell our securities in a primary offering on our Form S-3 is currently limited by Instruction I.B.6 of Form S-3, commonly referred to as the "baby shelf" limitation. If we raise additional capital through the 26 -------------------------------------------------------------------------------- sale of equity or convertible debt securities, the ownership interests of our stockholders will be diluted, and the terms may include liquidation or other preferences that could adversely affect the rights of our existing stockholders. If we raise additional capital through the issuance of debt securities, we could incur fixed payment obligations and become subject to certain restrictive covenants, including limitations on our ability to incur additional debt and acquire or license intellectual property rights, and other operating restrictions that could restrict our ability to conduct our business. In addition, we may receive additional capital through the exercise of outstanding warrants to purchase our stock if our stock price sufficiently increases. As ofSeptember 30, 2021 , warrants to purchase 5,750,000 shares of our Series 1 preferred stock at an exercise price of$130.00 per share (equivalent to$13.00 per share of common stock) and warrants to purchase 4,149,378 shares of our common stock at an exercise price of$6.50 per share were outstanding. The preferred stock warrants expire onAugust 21, 2026 and the common warrants expire onNovember 3, 2025 . As a result of the COVID-19 pandemic and actions taken to slow its spread, the global credit and financial markets have experienced extreme volatility, including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. There can be no assurance that further deterioration in credit and financial markets and confidence in economic conditions will not occur. If equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult to obtain, more costly and/or more dilutive. Moreover, if we do not obtain such additional funds, there could be substantial doubt about our ability to continue as a going concern and increased risk of insolvency, which could result in a total loss of investment to our stockholders and other security holders.
Cash Flows
Operating Activities
Net cash used in operating activities during the nine months endedSeptember 30, 2021 was$17.1 million compared to$43.3 million for the same period last year. The changes in cash flow from operating activities during the nine months endedSeptember 30, 2021 were due to$12.2 million of net losses, a non-cash gain of$7.5 million recognized from the change in the derivative warrant and private placement option fair value liability and a$0.5 million decrease from changes in operating assets and liabilities. This was partially offset by$2.6 million of share-based compensation and$0.1 million of depreciation expense.
Investing Activities
Net cash provided by investing activities during the nine months endedSeptember 30, 2021 was$0.9 million compared to$14.1 million for the same period last year. The change in cash flow from investing activities during the nine months endedSeptember 30, 2021 was due to$0.9 million net proceeds received from the sale of property and equipment. Cash provided by investing activities for the same period last year was due to$14.9 million of proceeds from the sale of property and equipment.
Financing Activities
Net cash used in financing activities during the nine months endedSeptember 30, 2021 was less than$0.1 million on financing lease obligations compared to net cash used in financing activities of$10.0 million for the same period last year primarily due to principal debt repayments.
Critical Accounting Policies and Estimates
There have been no material changes to the Company's critical accounting policies and use of estimates from those disclosed in the Company's Form 10-K for the year endedDecember 31, 2020 . For a discussion of our critical accounting policies and use of estimates, refer to Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Significant Estimates in Part II, Item 7 of our Annual Report on Form 10-K for the year endedDecember 31, 2020 .
Recent Accounting Pronouncements
The Company is subject to several recently issued accounting pronouncements. Note 1 - Organization, Basis of Presentation, and Summary of Significant Accounting Policies - New Accounting Requirements and Disclosures which is contained in Part I,
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